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Sirius XM: Turtles All the Way Down

Sirius XM has struck the wrong chord with older artists.

Oldies and Sirius XM Radio(NASDAQ:SIRI) may not be so "happy together" after all.

Flo and Eddie from the 1960s rock group The Turtles are spearheading a class action lawsuit against the satellite radio provider, alleging that their recordings have been infringed upon under state law.

The sticking point here is that federal copyright protection began covering sound recordings in early 1972, but the plaintiffs here claim that their pre-1972 tunes -- including The Turtles' iconic "Happy Together" -- should be governed by state laws now that Sirius XM is no longer shelling out performance royalties for them.

According to The Wall Street Journal, royalty collector SoundExchange began requiring Sirius XM and streaming websites to submit itemized lists of every song that they play. The result is that Sirius XM has stopped reporting the songs released before federal copyright protection kicked in on Feb. 15, 1972. Pandora(NYSE:P) also stopped paying royalties for older songs.

It's easy to see why older artists are upset, but should federal statutes be pre-empted by state laws? That's what we will find out as the plaintiffs sue Sirius XM for misappropriation, unfair competition, and conversion under California civil code, according to The Hollywood Reporter.

This wasn't much of a problem before because AM and FM stations were exempt from paying royalties. Airplay drummed up record sales, and seedy payola stories run rampant of labels and artists being the ones to pay the stations to get noticed.

It's a whole new world now.

This may very well wind up costing Sirius XM, and to a lesser extent, Pandora, some serious money, but this could also be the case that revisits the ridiculous disparities in varying royalty rates. Why is Pandora paying more than terrestrial radio? Aren't they both ad-based music broadcasters? Why should Pandora have to buy a small South Dakota radio station in a challenged stunt to lower its rates?

It will be interesting to see how this all plays out, especially at a time when tech giants are starting to throw their hats into the streaming music ring.

Author

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time with more than 20,000 bylines over those 22 years. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he splits his time living in Miami, Florida and Celebration, Florida.
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